Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended January 31, 2013; compared with the corresponding 2012 periods. The mountain and resort businesses are seasonal, with peak ski operations generally from mid-November through mid-April. Amounts below are in millions unless stated otherwise.
Financial performance
| Metric | Three months ended Jan. 31, 2013 | Three months ended Jan. 31, 2012 | Six months ended Jan. 31, 2013 | Six months ended Jan. 31, 2012 |
|---|---|---|---|---|
| Revenue | $422.5 | $373.3 | $538.8 | $489.7 |
| Operating income (loss) | $106.0 | $84.2 | $15.7 | $(0.2) |
| Net income (loss) attributable to Vail Resorts | $60.6 | $46.4 | $(0.03) | $(9.3) |
| Diluted EPS | $1.65 | $1.27 | — | $(0.26) |
| Reported EBITDA (non-GAAP) | $140.0 | $118.4 | $81.8 | $63.5 |
Second-quarter revenue rose 13.2%, while net income attributable to the company increased 30.5%. Second-quarter net margin was approximately 14.3%, versus 12.4% a year earlier. For the six-month period, revenue increased 10.0%; the company was approximately at break-even, compared with a $9.3 million loss in the prior year. Reported EBITDA is management’s non-GAAP segment performance measure and should not be treated as a substitute for GAAP results.
- Mountain: Second-quarter revenue rose 14.5% to $361.7 million and Reported EBITDA increased 16.8% to $140.8 million. Skier visits increased 11.0% to 3.22 million and effective ticket price rose 2.9% to $54.55. Growth reflected stronger Tahoe conditions, a strong holiday period, pricing and pass sales; Colorado visits were adversely affected by warm, low-snow conditions early in the season.
- Lodging: Second-quarter Reported EBITDA increased to $1.7 million from $1.2 million. Revenue excluding payroll reimbursements rose 2.8%; combined owned-hotel and managed-condominium RevPAR increased 1.5%.
- Real Estate: Second-quarter revenue increased to $14.2 million from $9.1 million, while the segment remained EBITDA-negative at $(2.6) million, an improvement from $(3.5) million. Results depend on the timing and mix of condominium closings.
Cash flow, debt and liquidity
- Six-month operating cash flow was $171.3 million, up from $137.4 million. Investing cash outflow was $73.6 million, including $53.9 million of capital expenditures and $20.0 million for the Afton Alps and Mount Brighton acquisitions. Financing cash outflow was $7.2 million, including $13.5 million of dividends paid.
- Cash and cash equivalents were $136.6 million at January 31, 2013, compared with $95.6 million a year earlier. Total debt was $490.3 million, nearly unchanged year over year; net debt declined to $353.7 million from $395.7 million. Most debt principal is not due until fiscal 2019 or later.
- Revolver availability was $332.7 million after letters of credit. Current assets of $322.2 million were below current liabilities of $333.3 million; the company cites seasonality and operating cash flows as important liquidity considerations.
- The company reported compliance with debt covenants at period-end. Variable-rate debt was $52.6 million; management estimated that a 100-basis-point LIBOR change would alter annual interest payments by approximately $0.5 million.
Outlook, commentary and risks
- Management expected Resort EBITDA, operating cash flows and future real-estate closings to support liquidity. It forecast calendar-year 2013 resort capital expenditures of approximately $130–$140 million, including about $25 million for the first phase of Epic Discovery summer activities and about $19 million for improvements at Afton Alps and Mount Brighton.
- Season-pass sales for the 2012/2013 season were higher year over year. Deferred season-pass revenue was $70.7 million at January 31, expected to be recognized in the fiscal third quarter as the ski season continued.
- On March 4, 2013, the board approved an approximately 10% increase in the annual dividend to $0.83 per share, subject to quarterly declaration; a $0.2075 quarterly dividend was declared. Future dividends remain subject to board discretion, available cash, debt restrictions and business conditions.
- Key operating risks include snowfall and weather, economic and travel demand, seasonal workforce availability, real-estate market weakness and uncertain timing of unit closings. Management noted that prolonged weakness could require price reductions or cause impairment charges on remaining real-estate inventory; impairment testing is also sensitive to projected cash flows.
- The company continued tax litigation over net operating loss utilization. It had not recognized the potential benefit; possible reversal of related liabilities and accrued interest and penalties was estimated at zero to $27.6 million. Legal proceedings and ordinary-course lawsuits were disclosed; management said recorded loss contingencies were not material.
- Letters of credit included $53.4 million supporting employee-housing bonds and $8.1 million supporting metropolitan-district bonds. The filing reported no material off-balance-sheet arrangements and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether skier visits, snowfall and season-pass revenue sustain the second-quarter Mountain segment gains through the remainder of the ski season.
- Progress against the $130–$140 million calendar-year 2013 capital-spending plan and the funding impact of acquisitions, dividends and resort projects.
- Real-estate closings, remaining unit inventory, selling prices and any evidence of impairment risk.
- Available revolver capacity, covenant headroom and the outcome and accounting implications of the unresolved tax NOL proceedings.
- Whether reported EBITDA trends translate into durable GAAP earnings and cash flow, given seasonal working-capital movements and non-GAAP exclusions.